Draft National Credit Amendment Bill Submission

Publication Date:
09/18/2018 05:15:43
National Credit Amendment Bill is not a sustainable debt-intervention measure

Purpose of this document

The Portfolio Committee on Trade and Industry (hereinafter referred to as “the Portfolio Committee”) published specific clauses of the Draft National Credit Amendment Bill (hereinafter referred to as “the Bill”), 2018 and the Memorandum on the Objects of the Bill (hereinafter referred to as “the Memorandum”) for public comment on 28 May 2018.
BASA would like to thank the Honourable Ms. Fubbs and the Portfolio Committee for the opportunities afforded to us to date to engage and discuss the debt intervention measures proposed by and deliberated on by the Portfolio Committee to alleviate over-indebtedness and financial distress.
We take note that the Portfolio Committee requested public comment on 3 specific clauses of the Bill and we address these specific clauses, as well as comments on the balance of the Bill to highlight remaining concerns. A failure to address any other aspects of the Bill should not be construed as an acceptance by BASA of its lawfulness or appropriateness. BASA has already addressed those aspects in its written submissions dated 22 January 2018 and in its oral submissions to Parliament on 31 January 2018. BASA stands by the contents of its earlier submissions.
We are appreciative of the incorporation of some of the changes proposed by BASA in the revised version of the Bill. It is our respectful view that the current version of the Bill still contains items that could have significant unintended consequences for consumers, credit providers and the banking sector more broadly. We respectfully request the Portfolio Committee to also consider the comments we are submitting on the balance of the Bill highlighting our remaining concerns.
The banking sector is a critical stakeholder in the assessment, review and feasibility of debt intervention measures given that banks grant 76.4% of new credit in the market (Source: NCR Consumer Credit Market Report, Q4-2017). Banks support the purposes of the National Credit Act 34 of 2005 as amended (hereinafter referred to as “the NCA”) and believe that over-indebtedness is a social and economic problem that has far reaching consequences for the economy and society.
As at December 2016, the total debt review portfolio across the major retail banks stood at a value of R 47,342 billion, with reduced interest rate concessions being provided to over-indebted consumers by the banking industry in the region of R3,425 billion for 2016. As at December 2017, the total debt review portfolio across the major retail banks stood at a value of R51,484 billion, with reduced interest rate concessions being provided to over-indebted consumers by the banking industry in the region of R3,976 billion for 2017 (based on the same % concession as 2016). These concessions include those made under voluntary debt review measures in line with the Task Team Agreement between credit providers and the NCR. From these statistics, it is evident that the banks continue to assist consumers that find themselves in financial difficulty, with R3,4 billion in 2016 and R4,0 billion in 2017 that banks had foregone in interest and fees.
Furthermore, due to the amendments to the NCA, which became operative in March 2015, an obligation was placed on credit providers to pro-actively ensure that they do not collect, re-activate or sell prescribed debt. This resulted in banks expunging a total of R 9,252 billion across various credit agreement types. Banks continue to expunge sizable prescribed debt monthly, in line with existing legislation. The aforementioned illustrates that banks are supportive of targeted and sustainable debt intervention measures. The implementation of any new debt intervention measures should be seen in the context of the already extensive debt intervention afforded to consumers and should aim to assist those consumers not provided with adequate relief. Furthermore, such measures should not introduce uncertainty or instability into the credit market as this will have a further negative impact on consumers and the South African economy.
BASA respectfully submits that the Bill, in its current format, including the 3 clauses published for public comment, could have significant unintended consequences and elements of the Bill are likely to lead to an unsustainable debt intervention measure. The basis for this contention is encapsulated in BASA’s detailed responses on the 3 clauses, as well as the remaining clauses of the Bill.
Following our submission on the revised Bill, BASA would welcome any further engagements with the respective stakeholders, as well as the Portfolio Committee, to discuss the specifics contained in this document. 

BASA Submission on Revised National Credit Amendment Bill incl 3 clauses V2.0

BASA Draft NCA Bill_Annexure A_Comments on 3 clauses VF2

BASA Draft NCA Bill_Annexure B_Legal and Operational Concerns Comments VF2

BASA Draft NCA Bill Annexure C Technical Corrections VF

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